Food buying enters a new era in India

NEW DELHI —  For 17 years, Pankaj Sharma has sold dusty bags of lentils and other faded staples from a tiny roadside shop on a potholed street of Noida, a middle-class district of New Delhi. But the other day, most of his regular customers were lined up two doors down at Reliance Fresh, the capital’s first modern supermarket.

Inside, throngs of excited customers jostled in air-conditioned comfort past black plastic bins piled high with cauliflower, carrots and guavas. They packed their baskets with fresh, neatly labeled packages of cheap flour, spices and sugar.

Near the exit, smiling cashiers in matching red polo shirts and baseball caps tallied purchases on half a dozen new high-tech registers.

“It’s very good, the cheapest of all the shops in Noida. And it’s fresh and people are very helpful,” said Sangeeta Sharma, 35, a homemaker. “I’ll come again, even if it’s crowded. This is the only place you can get everything under one roof.”

India is in the midst of a retail revolution. For centuries, Indians have bought everything -- groceries, stationery, clothing, appliances, medicine -- from tiny neighborhood stores, most offering a limited stock of goods of variable quality.

Gathering groceries usually requires visiting several small shops, each specializing in vegetables and fruit, meat, bread and other staples, then waiting interminably in the stifling heat while shopkeepers tally the purchases by hand.

In a world where international retail chains like Wal-Mart and Carrefour have grabbed a big chunk of sales with hugely successful hypermarkets in nations from Brazil to Zambia, India’s 1 billion people still buy 97% of their goods from the country’s 12 million mom-and-pop shops.

That is about to change. Since late last year, Reliance Retail, a subsidiary of Reliance Industries, one of India’s biggest companies, has opened 57 small, modern supermarkets in Hyderabad, Jaipur, Chennai (formerly Madras) and now New Delhi. The stores, with air-conditioned aisles, shopping carts, automatic doors and prices lower than the mom-and-pops’, are rapidly pulling in customers.

Reliance “is an unqualified success,” said Arvind Singhal, a retailing expert and managing director of KSA Technopak, a business consulting firm in New Delhi. “They’re performing way above expectations and customer feedback is positive.”

Singhal, who has advised Reliance as well as international giants on how to enter India’s retail market, said the Reliance Fresh stores met their six-month sales targets within the first month.

“My only complaint is the store is too small and the number of customers too big,” said P.K. Sharma, 45, one of the shoppers elbowing through the throngs at the new convenience-store-sized supermarket in Noida, which drew more than 8,000 customers on its first day.

“These are the stores India needs to have in large numbers,” he said. “This is just the beginning, but we are fast catching up to the rest of the world.”

Raghu Pillai, president of Reliance Retail, said the nine small Reliance supermarkets that have opened in New Delhi this year are just the first of 100 set to open in the capital by April.

Over the next five years, Reliance plans to spend $5.5 billion nationwide on retail outlets, adding pharmaceutical and appliance shops to its offerings and building a supply chain capable of getting tons of fresh fruits and vegetables to market quickly in refrigerated trucks -- a revolution in a nation where most perishables travel in overloaded open vehicles and 40% spoil before reaching consumers.

The success of the new chain supermarkets is tough news for millions of small-business owners in a country where seemingly everyone runs a shop and has little interest in working for someone else.

“I’m worried,” said Sumit Gupta, 21, who operates a roadside stand selling spices, crackers, pasta and peanuts in big burlap bags near the new Reliance Fresh in Noida. “These big places sell good quality and they’re cleaner. People are taken in by that. There could be people who go there and don’t come to me anymore.”

Reliance Fresh officials said the company hoped to create half a million jobs over the next five years as the chain expanded.

But Gupta said he wasn’t interested in becoming a cashier or a stocker.

“I wouldn’t work for anyone else,” he said. “I am the boss.”

Reliance says there’s room for their supermarkets and enterprises like Gupta’s. With India’s $771-billion economy growing at nearly 10% a year, according to the World Bank, the country’s retail sector is expanding by more than $27 billion a year.

“The numbers suggest there’s room for everyone in this market,” said Gunender Kapur, the head of Reliance’s food businesses.

His boss, Pillai, also says that traditional and modern retail “will definitely coexist,” at least in the short term.

But fear that modern retailing will quickly break India’s small businesses is so widespread and inflammatory that Reliance has tacked on plans to allow small local vendors to buy fruits and vegetables from the company’s new supply chain in an effort to spread the benefits and derail social criticism. The company also is investing in programs to help small farmers, who supply most of the food the company sells.

Winning over all of India will take time. Many of the country’s poorest consider any air-conditioned shop too expensive to enter, and find things like automatic doors intimidating, said Jai Bendre, head of food marketing for Reliance.

Most of India’s richest people rarely shop for groceries themselves, instead sending servants or phoning in orders for delivery, “a relationship that is bound to stick for a while,” she said.

But in a country where cities are congested with traffic and transport is difficult, Reliance Fresh has opted to open hundreds of small neighborhood supermarkets rather than hypermarkets at the edge of town. To cater to the country’s huge number of vegetarians, all shops will be meat-free, or have separate entrances for the meat sections.

We “understand the Indian consumer,” Pillai said. By the time international chain brands like Wal-Mart and Carrefour arrive -- they are still partnering with Indian firms, as required by law -- Reliance hopes to have the market won over.

Pankaj Sharm, 27, who sells lentils from his father’s tiny storefront near the Reliance Fresh in Noida, says he’s not worried. The new chain stores are just a passing fad, he said.

“In 15 days everybody will be used to them and they will come back to me,” he predicted, sitting idly on a parked motorcycle as his former customers flocked to the competition. Besides, he said, his prices are lower, just 45 cents for about a pound of yellow lentils.

At Reliance Fresh, they were selling for 43 cents.